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Insurance Executive

Four Questions for Aspen’s Pat Hickey

Accumulation risk due to the increased size of marine vessels is something marine underwriters are keeping a keen eye on.
By: | July 6, 2017 • 4 min read
Topics: Claims | Marine | Underwriting

In April of 2017, the International Union of Marine Insurance underwriters, or IUMI, released a report pointing to increased energy losses and accumulation risks for marine underwriters. Pat Hickey, Executive Vice President, Marine, at Aspen Insurance shared with Risk & Insurance some of this thoughts on IUMI’s findings.

R&I: Grounding losses in particular are increasing sharply, according to IUMI. What’s at play here? What factors are leading to this?

PH: This is a very interesting, and disturbing, trend where human error is most likely the root cause. The question is what is driving it? I believe it is multi-faceted; however, there is evidence that we have become overly dependent on electronic navigation and enhanced technology to make decisions for us. Accordingly, we are losing critical human interaction and judgment to avoid these incidents.

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In addition, we must also consider general distraction due to mobile phones, tablets and other technologies unrelated to vessel navigation.  In January of 2016, an incident occurred on the Mississippi River near New Orleans involving tank barges and towing vessels that caused $60 million in damages to the vessels and docks. The U.S. National Transportation Safety Board (NTSB) determined that the captain of one of the towing vessels was on a personal call on his mobile phone just prior to the collision.

R&I: Given the losses we’re seeing, what changes might risk managers and insureds see going forward in aspects of the marine transit losses underwriters are willing to cover?

PH: Marine underwriters need to be flexible and creative, to cover global maritime risks, and very few risks are exactly the same. It’s incumbent on marine underwriters to know their customers’ exposures so they can build manuscript coverages around those unique risks.   As losses increase, skilled marine underwriters will look to partner with their customers to minimize, or eliminate, those risks. When we partner with a dedicated customer willing to work with our risk engineers, there are few challenges we cannot solve together. When we do not see the expected level of engagement or willingness to address losses, we may consider utilizing exclusions and higher retentions. We prefer to provide broad coverage to partners who focus on risk management since that can drive down both losses and premiums.

It would be naive for us to suggest that ports operating 24/7 with increased accumulation exposure are not at risk.

R&I: Accumulation risk in ports, notably those in China, is a concern, according to IUMI’s report. The explosion in Tianjin was such a serious incident on many levels. How likely is it that we could see another event on the scale of a Tianjin and why?

PH: Tianjin was perhaps the perfect storm; however, we need to consider the underlying exposures and regulations that could contribute to a future event. The vast increase in the size of cargo vessels quickly translates to greater exposure per vessel, and significantly greater exposure at major port facilities.  While steamship lines and ports do an exceptional job of quickly and safely moving freight, a relatively simple error of misdeclared cargo (e.g. hazardous materials) could end up causing a catastrophic loss. It would be naive for us to suggest that ports operating 24/7 with increased accumulation exposure are not at risk.

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R&I: Discussions are under way in our nation’s capital on increasing the coastal areas that would be open to oil drilling. After a relatively calm period of drilling exploration, what are the risks and opportunities for energy insureds and their marine underwriting carriers should drilling markedly increase again?

PH: These are very exciting discussions for the marine and energy industries in general. The expansion would require the deployment of fleets for drilling with accompanying support vessels. Further, it is possible that some dormant equipment in the Gulf of Mexico could be redeployed to the coasts. This would also create additional employment opportunities for displaced Gulf oil and gas professionals, and ultimately boost revenue for the sector. As a direct result, marine underwriters would see immediate additional opportunities on these risks that could help grow premiums. There are additional risks associated with possible expansion and these include incidents that cause pollution, loss of life, habitat damage, or impacts to areas not prepared to quickly respond to disasters. Overall, I believe the opportunities outweigh the risks.  I am confident that marine underwriters and risk engineers could help clients mitigate these risks.

More from Risk & Insurance

More from Risk & Insurance

2018 Risk All Stars

Stop Mitigating Risk. Start Conquering It Like These 2018 Risk All Stars

The concept of risk mastery and ownership, as displayed by the 2018 Risk All Stars, includes not simply seeking to control outcomes but taking full responsibility for them.
By: | September 14, 2018 • 3 min read

People talk a lot about how risk managers can get a seat at the table. The discussion implies that the risk manager is an outsider, striving to get the ear or the attention of an insider, the CEO or CFO.

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But there are risk managers who go about things in a different way. And the 2018 Risk All Stars are prime examples of that.

These risk managers put in gear their passion, creativity and perseverance to become masters of a situation, pushing aside any notion that they are anything other than key players.

Goodyear’s Craig Melnick had only been with the global tire maker a few months when Hurricane Harvey dumped a record amount of rainfall on Houston.

Brilliant communication between Melnick and his new teammates gave him timely and valuable updates on the condition of manufacturing locations. Melnick remained in Akron, mastering the situation by moving inventory out of the storm’s path and making sure remediation crews were lined up ahead of time to give Goodyear its best leg up once the storm passed and the flood waters receded.

Goodyear’s resiliency in the face of the storm gave it credibility when it went to the insurance markets later that year for renewals. And here is where we hear a key phrase, produced by Kevin Garvey, one of Goodyear’s brokers at Aon.

“The markets always appreciate a risk manager who demonstrates ownership,” Garvey said, in what may be something of an understatement.

These risk managers put in gear their passion, creativity and perseverance to become masters of a situation, pushing aside any notion that they are anything other than key players.

Dianne Howard, a 2018 Risk All Star and the director of benefits and risk management for the Palm Beach County School District, achieved ownership of $50 million in property storm exposures for the district.

With FEMA saying it wouldn’t pay again for district storm losses it had already paid for, Howard went to the London markets and was successful in getting coverage. She also hammered out a deal in London that would partially reimburse the district if it suffered a mass shooting and needed to demolish a building, like what happened at Sandy Hook in Connecticut.

2018 Risk All Star Jim Cunningham was well-versed enough to know what traditional risk management theories would say when hospitality workers were suffering too many kitchen cuts. “Put a cut-prevention plan in place,” is the traditional wisdom.

But Cunningham, the vice president of risk management for the gaming company Pinnacle Entertainment, wasn’t satisfied with what looked to him like a Band-Aid approach.

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Instead, he used predictive analytics, depending on his own team to assemble company-specific data, to determine which safety measures should be used company wide. The result? Claims frequency at the company dropped 60 percent in the first year of his program.

Alumine Bellone, a 2018 Risk All Star and the vice president of risk management for Ardent Health Services, faced an overwhelming task: Create a uniform risk management program when her hospital group grew from 14 hospitals in three states to 31 hospitals in seven.

Bellone owned the situation by visiting each facility right before the acquisition and again right after, to make sure each caregiving population was ready to integrate into a standardized risk management system.

After consolidating insurance policies, Bellone achieved $893,000 in synergies.

In each of these cases, and in more on the following pages, we see examples of risk managers who weren’t just knocking on the door; they were owning the room. &

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Risk All Stars stand out from their peers by overcoming challenges through exceptional problem solving, creativity, clarity of vision and passion.

See the complete list of 2018 Risk All Stars.

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]